I spent a little while today calling clients and calming nerves.   If you didn’t get a call from me today, you will tomorrow.  Most of our clients are not too nervous and that could be a bad sign as real bear markets end when they have pushed everyone out of the market. That is if we are in a bear market. I don’t believe we are there yet unless interest rates rise aggressively or there is some global shock that causes an unforeseen economic retraction. Is Ebola the global shock?  Don’t think so. I talked to Geoff Tabin today about that (www.cureblindness.org).  He is a good friend of mine and a world- renowned ophthalmologist and adventurer.  More importantly he runs several eye clinics in Africa.  I asked him if we are getting insane about Ebola in this country and he said absolutely.  I asked him if it would have economic impact, and he said maybe on chocolate (cacao beans come from the Ivory Coast).  Not to be flippant he said that we are worrying way too much in the USA and not enough in Africa.  This may be a common refrain but by chance I was at my son’s pediatrician’s office today and she felt the same, that this country would be able to contain any Ebola outbreak.

In spite of a down 170-point decline in the Dow, the Fund made money today.  Many of our holdings actually went up as the Russell 2000, small cap closed higher. This had been one of the worst performing sectors and today’s respite might have marked a bottom there. Other sectors did not fare so well. Banks acted horribly today, joining the litany of major groups breaking down.  A true bear market doesn’t leave any group unscathed and banks have been doing well in this decline until today.  JP Morgan went down 4.24%, Wells Fargo, -2.01%, Bank America, -4.60%, and Citigroup reversed its gain yesterday with a 3.48% loss. PNC Financial Services beat their quarterly numbers handsomely but sank 4.40%. When I woke up at 4AM PNC was trading handsomely in Europe, up two or three points and then the second Ebola case news broke.  We had a large position going into earnings expecting that the PNC director that bought $2 million worth in August knew something that the market didn’t.  Perhaps he did but as much as insiders have an advantage about the economics of their companies, they have no better understanding of the macro investment climate than you are I. We dumped the stock as much as we could in the premarket and then went short it and other banks for a day trade.

The sad economics of banking is that interest margins are shrinking and pressuring earnings. At one point today the long bond (30 yr. treasury futures were up over five full points.  I’ve never seen this before and I heard one old timer on CNBC say he didn’t even see this kind of move in the market crash of 1987. That looked like capitulation in the bond market to me and I will be surprised if that doesn’t mark the low in the interest rate cycle.

Which brings up my final point.  Interest rates are at all time lows and in the real scheme of things; interest rates are the single most important determinant measure of stock market values.  Low rates are good for stocks, look at the last five years for starters.  This month’s technical breakdown and apparent global slowdown will serve to keep rates lower for a lot longer than people might have forecast just a few weeks ago. That’s very encouraging for stock market investors.

Is there more downside risk?  I don’t know the answer to that but it will be interesting to see what the corporate insiders think. If they step up and buy this dip, I’d say we are closer to  a bottom.  They haven’t yet pulled out their checkbooks, but I suspect that once this earnings season blackout is over you will see a surge in buying.  If not, then I do suspect there is more downside risk.